Delivering Value, With Options

by Anna Stanley On Apr 21, 2008

DALLAS — The buzzwords at the Airport Revenue News 2008 Conference and Exhibition held here in late February were experience and value, as in giving customers an experience they value as the quickest way to their hearts — and wallets. While generational shifts make meeting the needs of passengers a greater challenge, one analyst advises that the Baby Boomers still rule. At the same time, airports themselves are changing as developers recognize the value of being near-airport. The meeting also featured some insights from a leading television travel editor, who offered his travel experience dos and don’ts.

Retail is tough, says Jim Dion, founder and president of Dionco Inc., a retail consulting and training firm based in Chicago. And there are various reasons for that, from conditioning customers to wait for big ‘X percent off’ sales to simply the amount of retail already out there -— 40 square feet of retail for every person in North America, to be exact.

Dion says the consumers are just getting harder to reach.

“They’re increasingly time poor,” Dion says. “All our labor-saving devices have simply added labor to us. And we’re all seeing in America today, unfortunately, a lot of our productivity increases are not only coming from technology but … multi-tasking on the job site. And so people are stressed out today.”

He says consumer expectations are constantly being raised. He points to photo development as one example — what once took three days evolved into one day, then one hour, and now it’s instantaneous.

“[Customers] are better educated. And there is nothing worse than an educated customer. Give me a good stupid customer any day. These educated customers are skeptical, they’re cynical, they’re demanding.
“The bar is getting raised every year.”

Plus, the markets have fragmented. “There is no kind of mass market out there anymore.”

Generationally, Dion says America is aging. “We are changing in America,” He says. “We are getting older. But Baby Boomers still rule.

“So many marketers today are going after Gen-X and Gen-Y. Duh. [Boomers] is where the money is. This is where the money is going to be for the next 25 years.”

Dion says that within two years, Boomers will spend $2 trillion more than all people younger than age 45. And he notes that Boomers are staying ‘younger’ longer.

“We’re not going to be heading for our rocking chairs at 65 years old,” Dion says. “And we love to try new stuff.”

Dion says seniors are a good market, in that they have more free time and therefore spend more on travel and leisure. Plus, they have much more brand loyalty than younger generations.

Of Gen Xers, Dion says, “It’s too bad they don’t have a heck of a lot of money, but when they do have money and as they earn it, they spend very aggressively.” He notes that authenticity really matters to people in this age group.

And generation Y?

“These are Madison Avenue advertising people’s worst nightmare, because they don’t believe in advertising,” Dion says. “The only people they trust is each other.”

With nearly 38 million immigrants in the United States, Dion says the growing Hispanic population will be another market to target. But he warns against assuming it’s a homogenous population, citing a Cinco De Mayo promotion one company recently ran in Miami. Unfortunately for that company, they were promoting a Mexican holiday to a predominantly Cuban market.

“We’re really looking at 20 different markets,” Dion says. “There is no single Hispanic market.”

Dion notes that there are two ways to go right now in retail. “Customers want it fast and now, or an incredible experience. We’re seeing retail developing into that dichotomy.”

He says delivering experience — driven by the simple fact that most customers don’t need more ‘stuff’ - comes in many forms. For example, Starbucks is successful based on a home away from home experience, while Apple store’s success comes from being highly interactive for customers. Meanwhile, Costco is thriving on a ‘treasure hunt’ feel, something for which he says people are willing to pay extra.

“We complain about the price of gasoline, but what is fascinating today is that, have you ever priced out a gallon of Starbucks coffee?” Dion asks. “It is far more than the price of gasoline.”

He says architecture and design are another element to the experience, like highly stylized home appliances. “You can upgrade anything.”

And poor customer service can ruin it. “What customers are most aggravated about right now are staff,” Dion says. “That’s where most retailers fall down today.”

Dion recommends airports rethink their competition, because it’s not in other airports. “Go back and look at what is the experience like shopping in your stores in an airport.

“I compare you to my local jewel store. I compare you to my local Limited, to my local Abercrombie, to all of the stores I visit during a normal shopping day, week, or month. Customers shop horizontally.

“As a consumer who spends a lot of time at the airport, I really do want something different. Because if I walk by another boring store while I’m angry about being delayed again, I would just love to find something where I could just kind of lose myself and go ‘Wow, that’s cool.’

Food trends — it’s about expectations
Julia Stewart, chairwoman and CEO of IHOP Corporation, says much has changed in the restaurant business — particularly customers’ sophistication levels, and thus their expectations.

“Consumers are exposed to more cuisine than ever before. They have broadened their palates, they have eaten things that they would never have imagined, and they come home wanting more. They’re searching for these tastes from faraway places.”

She says these expectations affect not just what customers eat, but how they order. “More than ever, consumers want to be in control,” Stewart says. “They want to enjoy many tastes from the menu. Couples want to order five appetizers and share them and call it dinner.”

She says customers are also much more apt to go for snacking and smaller meals. “Guests still want dessert, but they don’t want to feel guilty about it the next day. So we’re seeing mini-desserts become extremely popular. Bottom line, consumers want choices. They want to have options when it comes to serving size.”

They also want what they want, when they want it — like breakfast all day and burgers at 6 a.m.

“It really comes down to consumers having different needs on different days. And the brands that meet those needs will prosper.”

She says that in the face of food recalls, sourcing information is the new trend for conscientious customers. “For these cutting-edge consumers, organic is old news,” Stewart comments. “They’re now more interested in the diets on which livestock were raised. They ask if the animals were grass fed. They’re looking for seafood that is sustainable. They have concerns over how their dietary needs are impacting the world around them. It’s a new level of consciousness not seen before. Consumers really do care.”

She says people are turning to small batch craft beers and artisan liquors. “People find satisfaction in helping out the little guy. There’s a certain joy in being an early adopter of an up and coming small brand. Who doesn’t like to be in the know?”

Breakfast is also big. “Lately, everybody wants to be in the breakfast business.

“Interestingly, it has been very effective for some, such as McDonalds, but not very successful for others, such as Starbucks.” She explains the trick is to keep new offerings in line with the brand’s position, and by extension consumers’ expectations.

Stewart says for restaurants in airports, keeping the menu lean for the sake of profit margin is key, as is “overtraining” employees so expectations are clear. And the payoff can be beneficial. She says many people come to restaurants looking for respite, which is especially true for travelers.

“I think what you can do in 35 to 40 minutes in an airport has huge return on investment. If you can turn the consumer’s view of the world that day, you have a better chance of getting a more loyal guest.
“The airport has the opportunity to do more of that.”

And how to achieve it?

“It’s less about what you serve, and more about the experience.”

Emerging trend: airport cities
James Jarvis, senior vice president at Ricondo and Associates, a full-service aviation consulting firm headquartered in Chicago, says there are examples all around the world of airports becoming much more than just getting people from point A to B.

The guiding principle is to keep passengers on airport grounds, while attracting locals in as well. Convention centers, hotels, high-end retail, entertainment, office and retail space, and major transportation hubs feature prominently.

“Think of airports as a congregation center,” Jarvis comments.

“I think Hong Kong is probably one of the best examples of a trend that is developing on the international front,” Jarvis says. “They didn’t want to be just an airport. They went to the next level.” Jarvis also cites airports in Zurich, Frankfurt, and Amsterdam as examples of this trend.

“What you might not know about Schipol is that ... they’ve also taken advantage of the draw the airport has on the local markets,” Jarvis notes. “The highest rate for office space in Amsterdam is not downtown … it’s in the areas immediately around Schipol airport.

“That’s a trend that I think you’re going to see a lot more of in the United States. Property values are exploding in the U.S. around airports. Traditionally, that has not been the case. It’s urban blight around most airports.”

He cites the population and property value explosion surrounding Washington Dulles International Airport as another example. “Land development at airports in the U.S. is an extremely hot commodity right now.”
Also, Jarvis says airports can be creative in coming up with revenue streams using land surrounding the airports. Farming, timber, windmills, and drilling are all options.

And within the airport, Jarvis says airports may soon be able to replicate the gaming revenue streams McCarran and Reno have long had a monopoly on. “I will bet that before I retire you will start to see slots in other airports around the country,” Jarvis says. “I can tell you, behind closed doors there are already conversations about this.”

The Passenger Perspective

Peter Greenberg, travel editor for NBC, the Today Show, MSNBC, and CNBC, says airports need to provide a better experience, with more common sense design based on the passenger perspective.

In many cases, he says, it’s the little things that count. On a preview tour of Heathrow’s Terminal 5, Greenberg says, everything was very impressive — except for the total lack of seating at the terminal entrance. The explanation: “Oh, no one’s going to have to sit here, because they’re just going to get out of their car and go right to their plane.”

Greenberg does not see this attitude as realistic. “Are you designing airports for real-world scenarios, or fantasies?” He also says items need to be placed in airports where passengers actually need and want to use them. “The only people who fly with nothing in their hands when they get off the plane are prisoners,” he says. “So where do airports put carts — at gates? No. It’s common sense. It’s also revenue, if you do it the right way.”

He notes that minor slights will also drive customers away, like attempts to nickel and dime for services. “I will not, unless I am forced to, fly to the Miami airport. You want wireless, it’s $10. Meanwhile, in Fort Lauderdale, wireless is free.”

“The entire travel industry ... has been predicated on a business model that hasn’t worked in a long time. And that business model is, ‘What will the market bear?’ Change that, please. It’s ‘What will the market value?’ The market will shift based on value, or perceived value. I actually made the shift to Fort Lauderdale just because of the wireless.

Greenberg says his two favorite airports are General Mitchell Field in Milwaukee and Boston Logan. He says both airports house stores that he enjoys, like used bookseller Renaissance Bookstore at General Mitchell. The kicker? Both airports’ stores provide shipping. “That’s the smartest thing anyone can do as a concessionaire ... anybody who buys something from your store, you ship it out. Because I want to minimize the schlep factor.”

Greenberg says he’s even stopped checking bags, preferring to FedEx luggage. “I save two and a half hours of my life every time I travel by not checking a bag.”

Greenberg says the airline’s bad reputation is causing a lot of ill will towards airports as well. He says airports, airlines, and vendors are all complicit in their failure to take responsibility. “In the airport business, you are either the beneficiary or the victim of bad airline managers. And lately you’ve been the victim, but you have control.”